Today's must see TV comes from the following interview of Pimm Fox on the consumer and the economy with retail expert Howard Davidowitz, who in 10 minutes provides more quality content and logical thought than we have seen from CNBC guests in probably all of 2010 (except of course for that one time when Erin Burnett kicked out Mike Pento, but that's a different story). Where does one start? Probably at the end: "I am not surprised by the strength of retail sales, because i knew that 30% of consumers are responsible for retail sales, and these 30% did much better because of the performance of capital markets. I don't think it is indicative of anything going forward. I don't think the economy is going to get any better. If you look at our fiscal and monetary policy, we went two trillion in the hole last year. Two trillion... to produce this... and unemployment went up to 9.8%!

We've spent two trillion we're printing money we're going bananas. Our balance sheet, we've got $2.6 trillion on there, and what;s on there government securities, and MBS." And here is the kicker for the world's biggest hedge fund, which at least one person besides Zero Hedge appears to get: "If interest rates go up a point Bernanke's bankrupt. Everything he's bought is underwater. All the MBS are underwater, the whole country is underwater." Does anyone see the issue now with why rising interest rates, aside from predicting a "recovery", may also, courtesy of its now $2 billion DV01, "predict" the insolvency of the Federal Reserve?

Some other observations on the retail "renaissance":

Walmart is 10% of US retail sales, has 150 million customers, and its stock it is down 6 consecutive quarters;

Sears is the largest department store in America: "their stock is terrible"

Best Buy had a huge earnings miss

Toys'R'Us loss increased last quarter

A&P filed bankruptcy

Loehmann's filed bankruptcy

Charming Shoppes is going to close 100 stores

TJMaxx just liquidated AJ Right

And in addition to dissecting the collapse of Sears, Davidowitz observes what should be a loud glaring alarm signal for the likes of Ackman and all those who are betting on the resurgence of the US mall storefront and the likes of General Growth: the bulk of store traffic is moving online (where incidentally the only jobs created are those of packagers and QC line people either in China or in soe warehouse in TX, CA or FL). To wit:

Online sales have to lead you to question the whole retail selling strategy. We have 21 square feet of selling space for every man woman and child in this country. We already have double of what we need. With the explosion of online sales, what happens to all these retail malls and shopping centers which are marginals?

Huge changes are going to be taking place as people continue shopping online.... In the end what do you do with the retail space...This is going to be a huge question for retail in the next ten years, that's why Walmart is starting to build smaller stores, that's why Walmart is building more overseas than they are building here. It's going to be the biggest retail change that we've ever seen."

The biggest losers: commercial real estate landlords. Read REITs:

Landlords better start figuring it out pretty quick because they already have occupancy problems, rent problems and everything else right now. I don't think the CRE problems are fixed by any means. That's why we are going to close hundreds of community banks going forward, we are going to close hundreds more. Those CRE debts are coming due and they will not be able to be rolled over.

We've got lots of problems still coming up in the banking system, and the problems in the real estate issue is here for a long time.

In other news, Kool Aid to be served in aisle 5 of the next door Sears box from now until permanent closing time.

Full must watch video after the jump (we are looking for an embeddable version).

And are baffeled completely by the sudden, unbudgeted for drop in state revenues.

Hello, this is what happens when you raise taxes in a recession. People lose their businesses. They fire employees and no longer pay income tax for them. Instead the employee is on unemployment and sucking off the system.

They are actually baffeled by this because those they voted for told them it would INCREASE state revenues and the schools here. Oops. We TOLD them this would happen. We weren’t exagerating at what the effect would be. It’s gonna get uglier than that before the dawn comes again.

I had to go to NSWC Port Hueneme in October. I drove the Pacific Coast Highway to Port Hueneme from LAX. There are hundreds of vacant properties along the PCH. Everything from small restraunts to car dealerships were boarded up. In Malibu, there were numerous “for rent” signs on beach houses and condos. The PCH at one time had the most desirable commercial property in the world. I stopped at a Porsche shop that was located on the PCH just south of Malibu. The guy had been in this location for over 20 years. He was waiting for his lease to expiire, and move his business to his home 10 miles inland.

9
posted on 12/30/2010 8:23:28 PM PST
by wjcsux
("In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell)

I dont think Californians want any business of any kind anywhere near the Pacific Coast Highway. I dont think they want any kind of business anywhere in their state, for that matter.They are certainly doing everything they can to drive productive people out of the state!

14
posted on 12/30/2010 8:49:51 PM PST
by wjcsux
("In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell)

It’s starting to hit it’s taking out a lot of smaller banks but the worse is yet to come the larger banks got more aid which is probably why it hasn’t shown up as much yet. I wonder how much taxpayers will end up losing on Tarp when it’s all said and done.

“Smaller TARP recipients are in worse shape than larger banks because the larger ones got help in addition to TARP, Mr. Cole said. Bank of America Corp. and Citigroup Inc. tapped the Federal Reserves emergency-liquidity programs frequently during the crisis.”

“Arthur Wilmarth, a George Washington University law professor and expert on banking regulation, said a lot of smaller TARP recipients are burdened with risky commercial-real-estate loans tied up in troubled strip malls and the like, and that makes it hard for them to raise new capital. A lot of them are in kind of a frozen position, he said.”

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